The UK Border Agency's failure to manage its workload is penalising individuals, draining public funds and jeopardising confidence in the asylum and immigration system, according to a report published today.

The report, by the parliamentary ombudsman, finds that the UKBA still has "a long way to go" to ensure that its administration, complaints handling procedures and remedy mechanisms are adequate.

It gives examples of how the UKBA's failure to resolve applications within a reasonable period has had a damaging effect on the individuals involved and public perceptions of the system.

In one case, a Somali man who applied for asylum and was granted indefinite leave to remain in May 2000 did not receive his status documents until February 2008.

In another, a Jamaican man who was granted indefinite leave to remain had to wait three-and-a-half years for the agency to give him the passport stamp he needed to prove he was entitled to stay in Britain. While he awaited the stamp, he was ­threatened with deportation, missed the funerals of his father and sister and could not visit his ill mother for fear that he would not be allowed back into Britain.

The parliamentary ombudsman – who independently investigates complaints about government departments – has received 478 complaints about the UKBA since last June.

During that time, the ombudsman's office investigated 33 complaints relating to the agency, of which it upheld or partly upheld 97%.

The parliamentary ombudsman, Ann Abraham, said that despite the agency's "significant progress" towards clearing the hundreds of thousands of backlogged cases, it had to do more. "They need to make sustained and consistent progress towards their commitment to meeting their service standards, clearing existing backlogs and avoiding them in future because the implications of them not doing so are serious and far-reaching, both for the individuals caught up in the system and for society as a whole," she said.

The report said there was also "a risk for the agency of a loss of faith in their system by applicants, by other related organisations, and by the public at large".

Not only did the UKBA's failings make life difficult for applicants and their families, it said, there was also "the cost to the public purse of supporting applicants pending a decision, as well as the cost to public services such as health, education and social services".

Abraham added that long delays in making decisions on immigration and asylum cases threatened the fairness of the system itself. "Applicants who would have been refused and removed, if the agency had made a decision at the proper time, can be allowed to stay because they have, in the meantime, put down sufficient roots in the UK so that it would be unreasonable to remove them.

Lin Homer, chief executive of UKBA, said the agency took the report's recommendations seriously but welcomed the acknowledgement that its complaints system was improving. "The UK Border Agency is continuing to make progress in dealing with the legacy backlog of older asylum cases and has already concluded more than 235,000 cases. I am confident we are on course to conclude these cases by the summer of 2011."

Donna Covey, chief executive of the Refugee Council, said the report underlined the importance of dealing with cases quickly and fairly. "It is in nobody's interests that those who are entitled to asylum in the UK are left waiting for years, unable to work and forced to rely on state support, or worse still, destitute," she said. "While there have been improvements in recent years and significant inroads have been made in processing asylum claims made before 2007, it is clear that much more needs to be done to ensure people's cases are treated fairly."

Covey also warned of further problems this summer when those refugees who were given five years' leave to remain following a change in government policy in 2005 had their cases reviewed.

She urged the government to avoid worsening the UKBA's backlog by reverting to the previous system whereby those who were judged unable to return to their countries because of persecution were automatically given indefinite leave to remain from the day they successfully proved their claim.